Question

A corporate bond has a coupon of 7.5 percent and pays interest annually. The face value is $1,000 and the current market price is $1,108.15. The bond matures in 14 years. What is the yield to maturity?

Answer 1

6.31%

Step-by-step explanation:

The rate formula should be used which is attached in the spreadsheet .

The NPER reflects the time period.

Given that,

Present value = $1,108.15

Future value or Face value = $1,000

PMT = 1,000 × 7.5% = $75

NPER = 14 years

The formula is shown below:

= Rate(NPER;PMT;-PV;FV;type)

The present value come in negative

So, the yield to maturity is 6.31%